Mexico consumer goods

Retail sales increase moderately in February

April 27th 2018 | Mexico | Retail

Event

Retail sales rose by 1.6% month on month in seasonally adjusted terms in February, and by 1.2% year on year, according to Inegi, the statistics institute.

Analysis

The 1.6% monthly rise in sales was better than expected; it was the second consecutive month of gains (sales rose by 0.5% in January) and the strongest performance since June 2016. The year-on-year rise of 1.2% was the strongest since May 2017, and followed an increase of 0.5% year on year in January (in year-on-year terms, retail sales had declined in each of the prior five months). The positive performance of retail was also underscored by a month-on-month increase of 0.9% in the number of workers employed in the sector, and by a 0.6% monthly rise in real average salaries.

The data for the retail sector in February indicate firmer household demand in the early months of 2018, supported by a recent easing of inflation, real wage growth and robust formal employment. This is helping to fuel positive overall economic activity. This was confirmed by the release earlier in April by Inegi of the Indicador Global de Actividad Económica (IGAE, a broad proxy for real GDP growth) for the same month. The IGAE grew by 0.7% month on month in seasonally adjusted terms in February, a turnaround from a contraction of 0.6% in January. In year-on-year terms, the IGAE grew by 2.3%, compared with 2.1% in January (both in seasonally adjusted terms). The increase in the IGAE was driven by growth in secondary activity (up by 0.4% month on month) and tertiary activity (up by 0.7%), with the latter having clearly been boosted by the performance of the retail sector.

The latest data suggest that momentum from the fourth quarter of 2017, when quarterly GDP grew by 0.8%, continued into the early months of 2018. This supports our estimate that GDP grew by 0.6% quarter on quarter in January-March. Inegi will release its preliminary estimates for first-quarter GDP performance on April 30th.

Impact on the forecast

We continue to assume that economic activity will ease later in the year, as consumer and investor confidence is affected by uncertainty surrounding the July elections and trade relations with the US. We retain our forecast that GDP will grow by 1.8% in 2018, down from 2% in 2017, although this will be subject to revision depending on Inegi's estimates for the first quarter.